According to a study, only 39% of eCommerce supply chains operate on multiple sales channels. 55% are still using pen-and-paper manual processes to manage their logistics.
This must be an old study, right? Perhaps it came from before the 2010s and the technological revolution.
Staggeringly, no. These numbers came from a 2018 study of eCommerce logistics.
This technological ineptitude is fantastic news for your business. Here’s why:
Given how slow eCommerce seems to adopt technology, let’s assume these numbers have modestly increased since 2018.
This means any eCommerce business managing their omnichannel strategy with a digital inventory management system (IMS) is competitively advantaged over nearly half of the market (assuming these percentages roughly correlate across market sectors).
Why? Because as we’ll discuss in this post, omnichannel inventory management is the inevitable future. And accomplishing the arduous task of managing your business across multiple channels is only possible with software.
In this post, we’ll unpack:
- Why a multi-channel strategy is so crucial to profitability
- The problems organizations face when implementing a multi-channel strategy
- Actionable solutions for overcoming those problems
Let’s start with the basics.
What is Multi-channel Inventory Management?
Multi-channel inventory management is the discipline of managing products across more than one sales channel. A sales channel is any platform, vendor, or physical location that services customers with your products.
Channels fall into three main buckets:
- eCommerce marketplaces such as Amazon, Etsy, and eBay
- Brick-and-mortar stores
- Personal eCommerce websites
Maintaining consistency, profitability, and customer satisfaction across all channels are the essential parts of multi-channel inventory management.
Why is Multi-channel Inventory Management So Important?
As we’ve mentioned many times over on our blog, scaling an eCommerce business with only a single sales channel is a massive undertaking. So why would any business intentionally take on the costs and complexity of more selling platforms?
In short, because multi-channel marketing is what the market demands. Here are some reasons why it’s so important.
Customers expect your products on multiple channels
Let’s say a customer is in the market for a new laptop computer. She has a rough idea of the specifications she needs, some notable brands, and her budget.
More than likely, she won’t go straight to a vendor’s website. No, today’s consumer knows they have more options than just one channel. She’ll likely do a Google search along the lines of “Best Lenovo laptops 2021” or “Best video editing laptops 2021,” depending on her needs.
Google, sensing her transactional intent (a fancy SEO term meaning she’s ready to buy), will present her with several eCommerce platforms on which to make her purchase.
This has rapidly become the expectation of all modern consumers. They want multiple channel options. And every channel that you aren’t utilizing is money left on the table.
In summary, your customers expect you to be everywhere. Buyers have become accustomed to a frictionless buying experience and can even purchase products without leaving Instagram or Facebook.
Established channels lend credence to your brand
One of the most significant “low hanging fruit” benefits of a multi-channel strategy is how much consumers trust these reputable platforms.
Say you’re a handmade jewelry vendor. Your ideal business model entails making, selling, and shipping your products out of your house via sales made on your website.
You’re not giving away a percentage of your revenue to a third party, and jewelry is relatively easy to store and ship.
However, while you’re getting your SEO juice going with blog posts, working out deals with influencers, and finalizing your brand identity, nobody knows who you are. Perhaps more importantly, nobody trusts you yet.
Where folks do go for handmade jewelry, however, is Amazon Handmade and Etsy. And those brands have spent billions of dollars to earn consumer trust over years of reliable service and consistent quality.
Branching out to those channels to ride their coattails is a strong strategy for small businesses. Then, once your revenue is consistent and you’ve built an audience, you can pivot to selling primarily on your site.
Or, who knows? Perhaps you’ll change your mind and broadly diversify your products across many channels. You’ll never know until you try a multi-channel approach.
Leveraging the proper channels accelerates growth
It’s not uncommon for a product to barely move on one channel and go gangbusters on another. Channels are marketed toward particular audiences and demographics.
You may think you have a solid grasp on who your primary buyer is, but only until you leverage multiple channels can you run experiments and indeed find the best channels for your shoppers.
Once you identify both the strong and weak performers, you can double down on the successful platforms and cut the dead weight of channels that don’t help your bottom line.
This is only possible when businesses have clear visibility into their multi-channel strategy. And this visibility is only attainable with a digital inventory management system (IMS).
First things first: you need an IMS.
Before we move any further, we need to address the issue of trying to do multi-channel inventory with manual processes. Long story short, you just can’t.
(We’re assuming you don’t want to be updating vendors and crunching numbers for 15 hours a day.)
We admit that certain eCommerce operations can get by managing all their inventory with paper-and-pen processes or with Excel. However, we’d been steering you wrong if we downplayed the complexity of successfully scaling an eCommerce business without an IMS.
And that’s only assuming a single sales channel and a couple of SKUs. Multiple channels, multiple SKUs, and potentially various warehouses render this strategy impossible without an IMS.
These manual inventory management processes are profoundly inefficient uses of human capital, especially in small or mid-sized businesses.
The Most Common Multi-Channel Inventory Management Problems
Let’s imagine a scenario for a moment. You’re a musical instrument retailer, and you’ve decided to take the plunge into selling your products on multiple channels. You’ve got a strategy in place, you feel prepared, and you’re registered with all your platforms of choice.
You’ve now come to your first fork in the road. How do you allocate stock to each channel? How much should each channel have? You divide your 15 clarinets into three equal parts for Amazon, eBay, and your website’s store.
You’re shocked to find that all five clarinets allocated to eBay sell out within 48 hours. Panicking, you divert all your stock from Amazon and your personal site to eBay. Make hay while the sun is shining, right?
After going into each marketplace and editing the stock totals manually, you’re left with an “out of stock” signal on your other channels. Now, rather than displaying an accurate tally of your inventory, you’re missing out on potential traffic from these other channels.
Remember, as far as they know, you’re out of stock (even though you’re not).
It’s like a game of Whack-A-Mole, but way less fun and way more expensive. This little scenario is just a glimpse of the incredible complexity a multi-channel strategy introduces into your business (and that was just for one SKU).
Thankfully, we’re not left without the tools to succeed. Let’s go over some of the biggest obstacles eCommerce businesses face when introducing a multi-channel strategy and ways to overcome them.
Inconsistent or Unlisted Inventory
This first problem is at the root of the scenario outlined above. We believe that real-time inventory updates are essential for all forward-thinking eCommerce operations. In a multi-channel situation, they’re absolutely vital.
Our musical instrument retailer situation caused customer irritation due to an erroneous stock-out signal. However, an even more frustrating experience can occur when you’re not auto-syncing inventory: customers order product that’s actually out of stock.
It’s clear to see why getting this one thing right can either make or break how customers view the reliability of your operation. Think about it: do you think spotty stocking info will engender more trust in your brand? How about overselling or underselling your products?
Inaccurate picture of revenue and ROI
SkuVault, working in concert with your CMS, can generate a single source of revenue truth. We can’t overstate the value of this in a multi-channel inventory strategy.
Imagine this: you want quarterly sales data of a particular product across all channels. Without an IMS, you’d have to undergo the following process:
- Log in to each sales channel’s back-end dashboard (Amazon, eBay, your own personal site, etc.).
- Download quarterly revenue data and use the various filters (hopefully) provided by the channel dashboard to isolate the product in question.
- Import all the unstructured sales data into a spreadsheet.
- Spend half an hour reconciling and massaging the data to make it coherent.
- Spend another 15 minutes parsing it out by month for readability.
And that’s for one report on one product.
Inconsistent shipping logistics
Without an IMS, selling across multiple channels adds an extra layer of logistical tedium to your workflow. A multi-channel strategy often entails printing and organizing shipping labels from various carriers.
This means importing purchase orders into each platform, making decisions on shipping costs, and utilizing the carriers that find the best balance between cost and on-time delivery.
The task becomes even more daunting (and inefficient) when you need to decide on each carrier’s most cost-effective shipping option.
Accounting Discrepancies Across Channels
By this point in the post, you should know what we’re going to say: gather all your streams of data and integrate them into a single source of truth.
If there’s one thing you take away from this post, let it be this simple idea.
Dealing with multi-channel accounting is no exception. Accounting is a massive source of headaches for small business owners. Why? Because oftentimes, entrepreneurs and business owners are highly visionary individuals.
And in the infancy stages of their ventures, they are the accounting department (as well as marketing, sales, business development, graphic design — all the entrepreneurs are nodding their heads right now).
“Visionary” and “accounting” don’t usually go in the same sentence. So, we like to ease the pain by leveraging tools like Quickbooks, Sage, or Xero.
We’ve reduced the head-splitting migraine down to just a normal headache — that’s progress.
But there’s still the task of reconciling all our financial data (including tax rules that differ across channels and shipping carriers) into our accounting software. That’s where IMS integration with your accounting software comes in.
Inability to focus on the big picture
All of the previous problems culminate in this one. It’s a tale as old as time: business owners get dollar signs in their eyes when they see how much money is on the table in a multi-channel inventory strategy.
They subsequently dive headfirst into as many channels as possible — often without a fully-baked plan.
They see momentum in the first few weeks, but quickly find themselves in the weeds and caught in all the tedium a multi-channel strategy demands.
As a result, they’re no longer visionary leaders, but firefighters (a term we discussed in a previous blog post). Their job as owners is to come in and put out logistical, accounting, and inventory fires.
“One day,” they say, “once this is all cleaned up, then we’ll be able to cast a vision for the organization again.” But it never happens because the to-do list grows faster than their ability to execute on it.
Solutions to The Most Common Multi-Channel Inventory Management Problems
Once you’ve established your IMS as the brain of your inventory management strategy, you can take it a step further by integrating channel management software (CMS).
Most IMS platforms like SkuVault integrate with the leading channel management platforms. Examples include Zentail, Suredone, ChannelAdvisor, ChannelSale, and SellerActive.
The integration allows SkuVault and your CMS of choice to “talk” to each other, passing inventory data back and forth in real-time.
In contrast to the above illustration, imagine if you simply told your CMS to allocate a percentage of stock to particular channels.
Then, your IMS automatically gives an inventory number to your CMS, then to each sales platform (this includes any brick-and-mortar stores in your strategy). As customers purchase, the inventory numbers automatically resync to each channel, keeping the total number of stock visible across all channels.
This eliminates the possibility of overserving or underserving customers and the hassle of manually updating stock information.
Most CMS platforms also allow edits on product descriptions and details from one central location. That means no going into each channel’s back-end administrator dashboard just to correct a simple typo or tweak some sales copy.
This includes the ability to run multi-channel promotions without needing to leave a single dashboard. Just navigating the interfaces of some of these platforms will make you want to pull your hair out. This alone is worth the price of solid inventory management and channel management tech stack.
Multi-channel Reporting and a Single Source of Truth
There are dozens of potential sales channels, all running on different systems, technology, and terminology. Each reports sales data a little bit differently. Imagine how much time you could save if you had a single source of revenue truth?
With an IMS like SkuVault integrated with channel management software, you can not only see your total revenue across the board at a moment’s notice but also drill down into specific marketplaces and SKUs to identify your high (and low) performers.
In short, you may be paying listing fees for platforms that don’t produce a positive ROI for your business.
Only with this level of granular reporting can you identify those holes in your boat.
In order to manage multi-channel inventory effectively, you need more than just revenue reporting. You’ll also need transaction history reporting, purchase order reports, and demand forecasts. All these can be accommodated by SkuVault and your CMS of choice.
Integrating your IMS with a shipping management platform
Shipping integration saves you precious time by keeping you organized and automated. Once you’ve made the sale, your shipping platform takes care of printing the appropriate labels — regardless of the channel.
This eliminates the decision fatigue of needing to pick the most suitable carrier for each order. It also helps you maximize your shipping spend by utilizing the best delivery vessel for the task at hand.
Again, it’s all about taking these disparate streams of data and collecting them into a single source of truth. Whether it’s logistics, revenue, or inventory allocation, utilizing this one principle is the key to success in a multi-channel approach.
Some available integrations with SkuVault include ShipStation, ShipWorks, Temando, and TrueShip.
To drill down a bit more, integration with a tool like ShipWorks affords your organization these tangible benefits:
- Connect your shipping process with over 80 channels and marketplaces
- Multi-carrier support (domestic and international)
- Print forms and documents for customs
- Special plans through UPS & FedEx
- Shipment tracking
Accounting synergy between systems
We’ve painted a picture of the profound time savings associated with integrating your IMS with your channel management platform. But you can take this efficiency a step further and create an even more enviable tech stack.
In addition to the aforementioned integrations, IMS platforms like SkuVault also integrate with almost every modern accounting software.
Your IMS acts as the hub, your single source of truth. It inputs and outputs inventory data in real-time, including sales from various channels (managed by your CMS). This revenue is then automatically logged in your QuickBooks ledger, for example, leaving you with a completely automated multi-channel inventory management system.
Imagine being able to automatically sync all your POs, invoices, and COGS in just a few clicks. How much time would that free up in your day? What high-level tasks could you accomplish if you didn’t have to deal with this tedium?
Automation, Efficiency, and Profitability with an IMS
An IMS is an investment; there’s no doubt. But just like any good investor, you must look down the tunnel of time at the potential ROI of automating your inventory management.
Review the things we’ve discussed in this post. Think of how many hours in a given week these tasks would require of you were you to do them manually. A better question might be: what’s the cost of not having an IMS?
Considering the immense opportunity and market demand of a multi-channel strategy, we’d venture a bet the cost is high.
We’d love to show you how SkuVault can help you get out of the weeds, come up for air, and execute a sustainable multi-channel inventory management strategy. Multi-channel inventory management is the future, and we want to offer eCommerce businesses the tools they need to win in this brave new world.
Reach out to our team for a live demo today.